What Americans think about Germany’s energy transition

In May, Rainer Baake and Jennifer Morgan published an article at Bloomberg recommending German renewables policy to Americans. Craig Morris found the reader comments especially interesting, both in what was said and what was completely left out.

Germany or the US? While on the surface things might look similar, things get confusing of one looks more closely. (Photo by Jeffrey G. Katz, CC BY-SA 3.0)

Germany or the US? While on the surface things might look familiar, discussions can get confusing when one looks more closely. (Photo by Jeffrey G. Katz, CC BY-SA 3.0)


Obviously, it’s hard to explain everything about a country’s energy policy in a single article, but the authors do a pretty good job of getting the big picture across. The knee-jerk reactions of readers in the comments section show how much work still needs to be done.

First, there are the things Americans don’t realize. Most importantly, Germans are switching to renewables owned largely by citizens, not corporations. Ironically, one reader associates Germany with “socialism, big government, central planning, and [a] lack of economic mobility.” In reality, Germans are more wedded to competition and free markets than Americans, and they have freedoms Americans don’t even know they lack. Furthermore, Germans support renewables with feed-in tariffs, which are floor prices, not subsidies.

Then there is the cost issue. Two readers wonder whether the cost of renewable power is 0.35 or 0.52 USD. Here, the figures probably refer to what Germans are currently paying for a kilowatt-hour of renewable electricity funded by feed-in tariffs. Back in 2004, more than 0.50 euros was offered for a kilowatt-hour from newly installed PV arrays for a 20-year term, meaning that those prices will still be paid for power from those systems up to 2023.

But the average price of a green kilowatt-hour is plummeting, with the feed-in tariffs offered for newly installed PV systems dropping to below 0.15 euros in July even for the smallest systems – and the rate will be around 0.10 euros for systems up to 10 megawatts. These rates continue to drop each month for newly installed PV arrays (remember: they are guaranteed for 20 years), and the price of onshore wind power has historically been between five and nine kilowatt-hours. So yes, the price Germans currently pay for green power may seem high, but those rates will continue to drop.

energytransition.de - graphic: Installed solar system prices have plummeted by 66% since 2006

Germany may have started off offering high rates for PV, but the rates have always been designed to provide a roughly 6 percent return on investments. The goal was to bring down the cost of PV through massive deployment – and it worked.

Whether we will reach the following target is a different question: “By 2015, the cost of electricity from a system consisting of wind and solar PV, with backup storage, is expected to be about the same as that of natural gas and coal,” the authors write. They do not provide a calculation, and I’ll save mine for a future blog post. But the statement leads one reader to comment, “When the government subsidies [sic] inevitably dry up, solar and wind will dry up and blow away, too.” In reality, the low price of renewable power is likely to lead to uncontrollable growth unless governments (as in the US) actively try to stop people from reducing their reliance on the grid – and leaving large utility companies sitting on their stranded investments.

One reader points to a VIK press release (in German) arguing that grid interruptions shorter than three minutes should also be tallied. This objection is perfectly reasonable, but it focuses on whether SAIDI should be used as the main indicator of grid reliability. If we are going to count the shortest grid interruptions, then we need to do so in all countries. The outcome will not be any different: Germany simply has one of the most, if not the single most, reliable grid of any industrialized country, with annual downtime roughly equivalent to what Americans are used to in a single month.

Which brings me to my own final comment – and this one goes to the authors themselves. In explaining grid reliability, they refer readers to three long studies as PDFs and do not mention this wonderful chart we made for this website last year. In fact, the authors do not mention us at all, referring readers instead sometimes even back to sources in German where we have provided the same information in English. So guys, do us a favor next time and let the world know that we are working hard here to make German information about the Energiewende available in English, okay?

Craig Morris (@PPchef) is the lead author of German Energy Transition. He directs Petite Planète and writes every workday for Renewables International.

by

Craig Morris

Craig Morris (@PPchef) is the lead author of Global Energy Transition. He is co-author of Energy Democracy, the first history of Germany’s Energiewende, and is currently Senior Fellow at the IASS.

8 Comments

  1. Alan Drake says

    I recently looked at the EIA carbon emissions statistics from 2007 to 2011.

    The drop in German carbon emissions per capita are below the European average.

    And I understand that in 2012, German carbon emissions increased.

    A MASSIVE investment in a “Renewables Only” approach, with mediocre results.

    Perhaps we should look towards the leaders in world carbon emissions reductions . Denmark is down -18.9% , France down -13.5% in four years. Both should be down more in the fifth year.

    Denmark has doubled wind BUT that is only half the story. The other efforts, mainly in transportation, also helped as much.

    The French are using renewables to decarbonize the 15% of their grid that relied on fossil fuels, but that is a small part of their effort. The French are addressing carbon emissions that the Germans (with their unlimited speed autobahns) ignore.

    And the French are getting MUCH better results than the Germans. They have gone from 66.4% of per capita carbon emissions in 2007 to 62.4% in 2011.

    I hope Americans will look to the Danish model (All of the Above) rather than the German model.

  2. Dennis Heidner says

    Craig, I’ve been trying to find the source of the data used for the US benchmark in the energy quality (reliability) chart. I’ve seen the CEER numbers – and most have exclusion for exceptional events — which are roughly defined as hurricanes, earthquakes, wild fires, tornadoes, severe wind events, ice storms, etc. If you remove those exceptional events from the US numbers – I believe the electrical grid is much higher. For example: “what Americans are used to in a single month.” I am in the Seattle area – in the last thirty years we’ve seen two outages that impacted the Seattle population groups. The cause both times were extreme winter storms that were equivalent to Cyclones Lothar and Martin in 1999.

    In both cases — even with renewables — we still would have seen the outages, because the storms had damaged the east/west HV, MV transmission lines as well as some of the north/south lines. Wind, solar, and hydro east of the Cascade mountain ranges were still funcional – but no way to get the power to the population centers. The distance wasn’t far – perhaps 100kM from the Seattle, but it was wide spread.

    I believe the pattern is the same you look at the outages along the east coast, the southern US states, southwestern; the majority of the outages are a result of force majeure.

    • Craig Morris
      Craig Morris says

      Dennis, data for the US are hard to find, but Morgan and Baake themselves refer to this study:

      http://certs.lbl.gov/pdf/lbnl1092e-puc-reliability-data.pdf

      See table 2 on page 11. Looks close to 300 minutes for the Pacific zone, so 25 minutes a month.

      I assure you that the 15 minutes a year of downtime here is also 15 minutes more than I would expect in a given year as a consumer.

  3. Alex Trembath says

    So let’s consider a GW of solar versus a GW of nuclear. According to Morris a GW of installed solar costs €1700/kW (US$2250/kW), or €1.70b/GW (US$2.25b/GW). Compare this to Finland’s Olkiluoto EPR “boondoggle,” which with significant cost overruns and delays looks like it will cost US$11.1b for a 1.6GW reactor, or US$6.93/GW. That’s almost three times the cost of a GW of solar!

    But now let’s consider capacity factor (CF) and the lifetime generation of the technologies (we’ll use 30 years because that’s typically how long nuclear power plant capital costs are amortized over and the rough warranted lifetime of solar panels). The German average CF is just over 0.09 for solar, but to make the math easier we’ll assume it’s 0.10. For nuclear capacity factors run between 0.80 and 0.90 — we’ll use 0.80.

    Solar:
    1 GW x (8760hrs/yr x 30 yrs) x 0.10 = 26,280 GWhs = 26.28 TWh
    US$2.25b/26.28 TWh = US$0.09b/TWh

    Nuclear:
    1 GW x (8760hrs/yr x 30 yrs) x 0.80 = 210,240 GWh = 210.24 TWh
    US$6.93/210.24 TWh = US$0.03b/TWh

    So expensive nuclear power from the troubled Finnish EPR boondoggle costs *three times less* than power generated by German solar panels installed in 2012.

    We’re told that solar costs are going down and nuclear costs are going up, despite demonstrated learning rates in standardized nuclear designs in places like South Korea and China. But in order for the cost of German solar-generated electricity to reach parity with nuclear-generated electricity, the installed cost of solar would have to decline by a factor of 3, to approximately €566/kW (US$750/kW). Considering that Finland’s EPR is one of the most expensive nuclear reactors ever built and Germany has far and away the lowest installed costs of solar in the world (roughly half that of the US and Japan), it seems clear to me that a cost gap of roughly this magnitude will endure for some time.

    Perhaps by the time the EPR is producing electricity later this decade, German solar will have indeed achieved these heroic cost reductions, at which point Germany will have another low-cost, zero-carbon option in addition to nuclear (albeit one that only produces electricity for an average 10% of the time).

    Other countries of course have much better solar insolation than Germany, but this relative advantage is mitigated by the fact that Germans are much, much better at installing solar panels than anyone else in the world. This helps explain why, even though solar module costs have plummeted in recent years and Japan has more sunlight than Germany, the Japanese PV FIT is currently US$0.40/kWh, compared to the over 10-year-old German PV FIT, now $US0.10-0.20/kWh according to Morris.

    http://www.meti.go.jp/english/policy/energy_environment/renewable/pdf/summary201207.pdf

    This back-of-the-envelope only looked at upfront costs to the generation technologies, and excluded factors like price subsidies for solar PV, nuclear O&M, equipment replacement for PV (inverters, etc.), PV cell degradation, unscheduled shutdowns of nuclear power, as well as the facts that the expected lifetime of a nuclear reactor is roughly twice that of an installed solar panel, that the EPR’s CF could well be closer to 0.90 than 0.80, and that solar installation costs do not include costs of firming power (renewable or otherwise). If anyone can show that Finland’s EPR is three times as expensive as assumed here, or German solar three times as cheap, then that would challenge the qualitative finding of this post. If not, then the finding remains that — while nuclear power plants are massive industrial projects with high upfront costs and challenges to construction and financing — nuclear electricity is cheaper than solar. This might explain why, despite claims that solar is much cheaper than nuclear, there are literally dozens of nuclear power plants in construction around the world.

  4. deedl says

    The EIA-Data you are talking about is not useful for evaluating the success of green energy policies. A large part of the emission drops between 2007 and 2011 in Europe and the US are caused by the recession. So the EIA-data has to be further examined how much of the emission drops is caused by economic contraction and how much by green policies. Germany was not really hit by the recession but still decreased emissions while increasing economic activity. That’s quite an achievement.

    You are partially right about the speed limit on autobahnen. But although there is no general speed limit, the majority of the german autobahnsystem (especially the heavy used parts) have a sort of local speed limit. So roughly two thirds of the german autobahnen have a de facto speed limit.

    Denmark is one of the few countries in the world that have even higher electricity prices than Germany has. If you prefer the Danish model, tell you fellow countrymen to pay that price. I guess thats nothing americans are up to.

  5. Alex Trembath says

    Craig,

    Our original analysis compared the cost of Finland’s EPR versus the cost of deploying a significant quantity of solar (~30GW over a decade). Of course for this we were criticized for comparing the cost of “over-paying” for solar via a feed-in tariff subsidy versus the raw capital costs of the EPR. You rebuttal compared the current German FIT (US$0.10-0.20/kWh) to the EDF’s proposed nuclear FIT in the UK for later this decade (US$0.15/kWh).

    Fair enough, but my comparison above was between raw capital costs — your cited $2250/kW for German PV and my cited $6930/kW for the EPR (this seems fair because your cited Hinkley capital costs are $6875/kW). This simple apples-to-apples comparison yields a factor 3 gap between electricity costs.

    If solar is really cheaper than nuclear, then we would expect to see German costs mirrored in other countries. But total installed costs for solar in the US are over twice those in Germany — $5000/kW in the US compared to $2250/kW in Germany, according to GTM Research. There is a similar cost gap between Germany and Japan — hence the $0.40/kWh PV in operation there.

    Which is lower — $0.40/kWh for Japanese PV or $0.15/kWh or UK nuclear? If Germany has made solar cheap, why does Japan have to set tariff rates so high? The answer is non-module costs. Germany has become so much better at installing solar panels because of a decade of experience, starting with very high FIT rates at above $0.50/kWh. It appears that to mimic Germany’s solar successes, other countries like Japan will have to set similarly high tariffs, as Japan is doing now, despite dramatically lower costs of modules.

    Even Germany’s non-module costs are above $1000/kW, or above the cost target the US Department of Energy has set for *total installed solar costs* by 2020. So even if the modules were free, German solar would not meet this criteria. And even if the German solar miracle achieves total installed costs below $1000/kW, countries like the US and Japan (where non-module costs are closer to $4000/kW) cannot simply import these costs to their national energy systems.

    https://docs.google.com/viewer?url=http%3A%2F%2Femp.lbl.gov%2Fsites%2Fall%2Ffiles%2Fgerman-us-pv-price-ppt.pdf
    http://www.prweb.com/releases/2013/6/prweb10814333.htm
    https://docs.google.com/viewer?url=http%3A%2F%2Fwww.meti.go.jp%2Fenglish%2Fpolicy%2Fenergy_environment%2Frenewable%2Fpdf%2Fsummary201207.pdf

    • Craig Morris
      Craig Morris says

      Alex,

      I can follow all of your math, and I don’t think you left anything out of the equation. Nonetheless, I do wonder why you think Germany’s success in reducing the soft costs of solar cannot be transferred to other countries, such as the US and Japan.

      Anyway, the quality of this discussion is such that it should not be hidden in a group of comments. I’d would love to see a fuller reaction from you on your blog. I’ll be pleased to respond from here or Renewables International.

      Ciao

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